Table Of ContentWorkbook for
NISM‐Series‐II‐A: Registrars to an Issue
and Share Transfer Agents ‐ Corporate
Certification Examination
National Institute of Securities Market
www.nism.ac.in
1
This workbook has been developed to assist candidates in preparing for the National Institute of
Securities Markets (NISM) Certification Examination for Registrars to an Issue and Share Transfer
Agents ‐Corporate.
Workbook Version: September 2016
Published by:
National Institute of Securities Markets
© National Institute of Securities Markets, 2016
Plot 82, Sector 17, Vashi
Navi Mumbai – 400 703, India
All rights reserved. Reproduction of this publication in any form without prior permission of the
publishers is strictly prohibited.
2
Foreword
NISM is a leading provider of high end professional education, certifications, training and
research in financial markets. NISM engages in capacity building among stakeholders in the
securities markets through professional education, financial literacy, enhancing governance
standards and fostering policy research. NISM works closely with all financial sector
regulators in the area of financial education.
NISM Certification programs aim to enhance the quality and standards of professionals
employed in various segments of the financial services sector. NISM’s School for
Certification of Intermediaries (SCI) develops and conducts certification examinations and
Continuing Professional Education (CPE) programs that aim to ensure that professionals
meet the defined minimum common knowledge benchmark for various critical market
functions.
NISM certification examinations and educational programs cater to different segments of
intermediaries focusing on varied product lines and functional areas. NISM Certifications
have established knowledge benchmarks for various market products and functions such as
Equities, Mutual Funds, Derivatives, Compliance, Operations, Advisory and Research.
NISM certification examinations and training programs provide a structured learning plan
and career path to students and job aspirants who wish to make a professional career in the
Securities markets. Till May 2015, NISM has certified nearly 4 lakh individuals through its
Certification Examinations and CPE Programs.
NISM supports candidates by providing lucid and focused workbooks that assist them in
understanding the subject and preparing for NISM Examinations. This book covers all
important aspects of the functioning of the Registrars and Transfer Agents related to
dealing, collecting or processing applications for listed companies; handling matters relating
to corporate actions, refunds or redemptions, repurchase of securities, etc. This book will be
useful to understand the overall RTA‐corporates role and the regulatory environment in
which they operate in India.
Sandip Ghose
Director
3
Disclaimer
The contents of this publication do not necessarily constitute or imply its endorsement,
recommendation, or favoring by the National Institute of Securities Markets (NISM) or the
Securities and Exchange Board of India (SEBI). This publication is meant for general reading
and educational purpose only.
The statements/explanations/concepts are of general nature and may not have taken into
account the particular objective/ move/ aim/ need/ circumstances of individual user/
reader/ organization/ institute. Thus NISM and SEBI do not assume any responsibility for any
wrong move or action taken based on the information available in this publication.
Therefore before acting on or following the steps suggested on any theme or before
following any recommendation given in this publication user/reader should consider/seek
professional advice.
The publication contains information, statements, opinions, statistics and materials that
have been obtained from sources believed to be reliable and the publishers of this title have
made best efforts to avoid any errors. However, publishers of this material offer no
guarantees and warranties of any kind to the readers/users of the information contained in
this publication.
Since the work and research is still going on in all these knowledge streams, NISM and SEBI
do not warrant the totality and absolute accuracy, adequacy or completeness of this
information and material and expressly disclaim any liability for errors or omissions in this
information and material herein. NISM and SEBI do not accept any legal liability what so
ever based on any information contained herein.
While the NISM Certification examination will be largely based on material in this workbook,
NISM does not guarantee that all questions in the examination will be from material
covered herein.
4
About NISM
National Institute of Securities Markets (NISM) was established by the Securities and
Exchange Board of India (SEBI), in pursuance of the announcement made by the Finance
Minister in his Budget Speech in February 2005.
SEBI, by establishing NISM, articulated the desire expressed by the Government of India to
promote securities market education and research.
Towards accomplishing the desire of Government of India and vision of SEBI, NISM delivers
financial and securities education at various levels and across various segments in India and
abroad. To implement its objectives, NISM has established six distinct schools to cater to the
educational needs of various constituencies such as investors, issuers, intermediaries,
regulatory staff, policy makers, academia and future professionals of securities markets.
NISM is mandated to implement Certification Examinations for professionals employed in
various segments of the Indian securities markets.
NISM also conducts numerous training programs and brings out various publications on
securities markets with a view to enhance knowledge levels of participants in the securities
industry.
About NISM Certifications
The School for Certification of Intermediaries (SCI) at NISM is engaged in developing and
administering Certification Examinations and CPE Programs for professionals employed in
various segments of the Indian securities markets. These Certifications and CPE Programs
are being developed and administered by NISM as mandated under Securities and Exchange
Board of India (Certification of Associated Persons in the Securities Markets) Regulations,
2007.
The skills, expertise and ethics of professionals in the securities markets are crucial in
providing effective intermediation to investors and in increasing the investor confidence in
market systems and processes. The School for Certification of Intermediaries (SCI) seeks to
ensure that market intermediaries meet defined minimum common benchmark of required
functional knowledge through Certification Examinations and Continuing Professional
Education Programmes on Mutual Funds, Equities, Derivatives Securities Operations,
Compliance, Research Analysis, Investment Advice and many more.
5
Certification creates quality market professionals and catalyzes greater investor
participation in the markets. Certification also provides structured career paths to students
and job aspirants in the securities markets.
About the Workbook
This workbook has been developed to assist candidates in preparing for the National
Institute of Securities Markets (NISM) Certification Examination for Registrars to an Issue
and Share Transfer Agents‐Mutual Fund. NISM‐Series‐II‐B: Registrars to an Issue and Share
Transfer Agents‐Mutual Fund Certification Examination seeks to create a common minimum
knowledge benchmark for associated persons working in Registrars to an Issue and Share
Transfer Agents (R&T agent) organizations performing any of the following functions for
listed companies: (a) dealing or interacting with the investors or issuers; (b) dealing,
collecting or processing applications from the applicants; (c) dealing with matters relating to
corporate actions, refunds or redemptions, repurchase of securities, etc; (d) handling
redressal of investors’ grievances; (e) responsible for internal control and risk management;
(f) responsible for any compliance of securities laws; (g) responsible for any other activity
performed under the Securities and Exchange Board of India (Registrars to an Issue and
Share Transfer Agents) Regulations, 1993.
The book covers basics of securities and securities markets role and functions of the R&T
Agents in the corporate securities issuance and transaction process and the regulatory
environment in which the R&T Agents operate in India.
Acknowledgement
This workbook has been developed by the Certification Team of NISM in co‐ordination with Ms. Uma
Shashikant, Ms. Sunita Abraham of the Centre of Investment Education and Learning.
NISM gratefully acknowledges the contribution of Registrars and Transfer Agent Association of India
(RAIN) and the Examination Committee for Registrar and Transfer Agent Examinations consisting of
nominated representatives from the RAIN.
6
About the Certification Examination for Registrars to an Issue and Share Transfer Agents –
Corporate
The examination seeks to create a common minimum knowledge benchmark for associated
persons working in Registrars to an Issue and Share Transfer Agents (R&T agent)
organizations performing any of the following functions for listed companies:
1. dealing or interacting with the investors or issuers;
2. dealing, collecting or processing applications from the applicants;
3. dealing with matters relating to corporate actions, refunds or redemptions,
repurchase of securities, etc;
4. handling redressal of investors’ grievances;
5. responsible for internal control and risk management;
6. responsible for any compliance of securities laws;
7. responsible for any other activity performed under the Securities and Exchange
Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993.
Examination Objectives
On successful completion of the examination the candidate should:
Know the basics of securities and securities markets
Understand broadly the role and functions of the R&T Agents in the corporate
securities issuance and transaction process.
Know the regulatory environment in which the R&T Agents operate in India.
Assessment Structure
The examination consists of 100 questions of 1 mark each and should be completed in 2
hours. The passing score on the examination is 50%. There shall be negative marking of 25%
of the marks assigned to a question.
Examination Structure
The exam covers knowledge competencies related to the basics of securities and markets
and those related to the processing of corporate offerings and subsequent operations.
How to register and take the examination
To find out more and register for the examination please visit www.nism.ac.in
7
TABLE OF CONTENTS
Chapter 1 Introduction to Securities ................................................................ …11
1.1. Introduction to Equity and Debt 11
1.2. Features of Equity Capital 12
1.3. Features of Debt Capital 15
1.4. Hybrid Structures 16
Chapter 2 Characteristics of Equity Shares……………………………………………………… 19
2.1. Investors in Equity Shares 19
2.2. Features of Equity Share Capital 21
2.3. Risks in Equity Investing 22
2.4. Dividend from Equity Shares 24
2.5. Preference Shares 25
2.6. Rights Issue of Shares 26
Chapter 3 Other Securities .............................................................................. …29
3.1. Warrants 29
3.2. Convertible Debentures 30
3.3. Depository Receipts 31
3.4. Foreign Currency Convertible Debenture (FCCB) 33
Chapter 4 Debt Securities ................................................................................ …37
4.1 Features of a Debt Security 37
4.2 Varying Coupon Structures 38
4.3 Other Types of Bonds 39
4.4 Classification of Debt Instruments 40
4.5 Yield from Debt Instruments 43
4.6 Credit Rating 43
Chapter 5 Mutual Funds .................................................................................. …47
5.1 Collective Investment Vehicle 47
5.2 Proportionate Share of Benefits 48
5.3 Units Vs Shares 48
5.4 Assets under Management (AUM) 50
5.5 Fund Recurring Expenses (FRE) 51
5.6 Net Assets 51
5.7 Assets and Liabilities in a Mutual Fund Portfolio 52
5.8 Advantages of Mutual Funds 53
8
Chapter 6 SEBI ‐ Role and Regulations ............................................................. …55
6.1 Role of SEBI 56
6.2 Investor Education and Protection Fund (IEPF) 58
6.3 SEBI Regulations 58
Chapter 7 Public Offer of Securities ................................................................. …65
7.1 Issuing Equity Capital 65
7.2 Public Offer of Shares 66
7.3 Reservations 67
7.4 Initial Public Offer 68
7.5 Eligibility for Public Issue of Shares 69
7.6 Follow‐on Public Offer 69
7.7 Buy Back of Securities 70
Chapter 8 Private Placement of Shares ............................................................ …75
8.1 Qualified Institutional Placement 76
8.2 Rights Issue 76
Chapter 9 Public Offering of Shares ................................................................. …79
9.1 Pre‐Issue Work 79
9.2 Post‐Issue Work 80
9.3 Terms and Concepts in Public Issue of Shares 81
9.4 Prospectus 82
9.5 Red Herring Prospectus 83
9.6 Underwriting 83
9.7 Green Shoe Option 84
9.8 Methods of Making a Public Issue of Shares 85
Chapter 10 Roles and Responsibilities in a Public Issue.. ................................. …95
10.1 Registrar and Transfer Agents 95
10.2 Bankers to the Issue 98
10.3 Brokers to the Issue/Syndicate Members/ Designated Intermediaries 101
Chapter 11 Depository Services ....................................................................... .103
11.1 Dematerialisation 104
9
